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Labor Contracts With Two-Dimensional Adverse Selection

Carlier, Guillaume; Gaumont, Damien (2000), Labor Contracts With Two-Dimensional Adverse Selection. https://basepub.dauphine.fr/handle/123456789/6245

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Type
Document de travail / Working paper
Date
2000
Publisher
Université Paris-Dauphine
Series title
Cahiers du CEREMADE
Series number
2000-22
Published in
Paris
Pages
20
Metadata
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Author(s)
Carlier, Guillaume
Gaumont, Damien
Abstract (EN)
We study incentive-compatible labor contracts in the case where both individual productivity and subjective discount rate are unobservable by the rm. We rst show that unidimensional manifolds of agents group on the same contract. High , low agents may choose the same contract as low , high agents. We show existence and uniqueness of an optimal wage function which is continuous and unbounded. This optimal wage function can be determined by the ironing procedure.
Subjects / Keywords
Adverse Selection; Incentive-Compatible Contracts; Ironing Procedure; Heterogeneous Time Preference
JEL
C61 - Optimization Techniques; Programming Models; Dynamic Analysis
C62 - Existence and Stability Conditions of Equilibrium
D82 - Asymmetric and Private Information; Mechanism Design
J31 - Wage Level and Structure; Wage Differentials